Will supply chain and inventory issues change AV? – delirious [PUBS]

In mid-August, Gary Kayye shared an Aurora ad on his LinkedIn page. In the ad, Aurora directly tackled Crestron’s well-known stock show. You can read more about the different reactions in Steph Beckett’s blog here.

The comments are interesting as real experience regarding what works with advertising – or what doesn’t.

Before I write more, I want to make it clear that my intention in this blog is not to attack any manufacturer or point fingers and say someone has done a bad job. This thread got me thinking today, though, about how companies are surviving this time. From all the discussions I have with my peers, it looks like manufacturers are able to deliver about 25% of what we would get before March 2020. In an interview with Gary Kayye posted here on rAVe (and linked here below), Dan Feldstein of Crestron noted that schools, for example, may only be able to equip 10 or the 90 classrooms they would typically complete in a summer (less than 10%). While I don’t think Feldstein intended this as a direct comparison to what Crestron was shipping, it does very clearly indicate a sharp decrease in supply.

I’m trying to figure out the accounting for any business that has had demand growing for three years but is only able to ship 25% (even 50% or 75%) of the product they shipped three years ago . Moreover, the additional expenses of various components, shipping and general inflation must be devastating, their margin and the company’s cash flow must be abysmal. We’ve seen several companies announce price increases of 10-25%, but that probably doesn’t cover the aforementioned issues.

Most troubling in my mind however is the catch-22 the makers find themselves in. If a company is struggling to develop its product because its supply chain is unstable, when can it catch up? For example, if a company keeps churning out as many Widget A’s as it can, then puts it on a shelf waiting for the components to arrive, at some point (maybe two years later), that company will have a massive overstock half-built Widget A.

Why? Because at the same time the manufacturing division is trying to build things, the engineering division is creating new things. The manufacturer will therefore have dilemmas on the road. Do they use the components as they arrive in the half-built Widget A, or do they focus the incoming product on a new Widget B? If the company is smart and forward-thinking, it will design products that are much less dependent on items it receives from a fragile supply chain. Can they build a newer model with fewer components? Can they design a software product that can be installed on an OEM PC and do the same job? Essentially, the dilemma is whether the product we are ordering today is the product we want in two years, and whether it will be the product the manufacturer wants to make and sell in two years.

When we think of supply chain issues, we often think of manufacturers, but this also impacts integrators and end users. Various social media threads tell horror stories of homes that cannot be completed because lighting, security, blinds and various other automation and electronic equipment cannot be provided. Businesses stand to lose thousands of dollars because of these failures. Construction projects in schools, restaurants, the HOW and businesses are stalled because the product simply does not exist. How long can an integration enterprise survive without direct cash flow from these projects?

Finally, some discussions have raised the question of whether manufacturers, in desperation, might turn to less reputable markets for various components. This could result in the delivery of sub-optimal products that are not as reliable as expected. If manufacturers cut that bend, and then two years later their products fail, they’ll have a whole new set of problems. All of this leads to the big question of who will survive in the short term and in the long term. It is perfectly reasonable to assume that some, perhaps many, integrators and manufacturers will have to lay off staff and suspend operations until supply chain issues are resolved. If they take too long to resolve, we might even see companies fail.

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